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Number 1 and 2
Which statement below is false concerning liquidation of a partnership?
a. All assets can be sold at fair value in a single transaction to a competitor or to others who
wish to continue the business.
b. Assets can be sold at distress prices in a single transaction to an interested party.
c. Assets can be sold piecemeal over an extended period of time to interested parties.
d. Assets must be liquidated solely through sale transactions.
Ans: B
Related Discussion: Causes of Liquidation

Which of the following is not a responsibility of an accountant during a partnership

a. To protect the creditors
b. To manage the liquidation process in a manner that results in the greatest amount of cash
c. To distribute the most cash to the partner with the greatest capital account
d. To ensure that partner distributions do not jeopardize payments to creditors
Ans: D
Related Discussion:

Number 3
Which of the following is not a part of the partnership liquidation process?
a. Allocation of any remaining profit or loss to partners' capital accounts
b. Liquidation of noncash assets
c. Closing of the accounting records
d. Recognition of market value adjustments of assets and liabilities
Ans: B
Related Discussion: Sequence of Priority Payments to Stakeholders (i.e. to Par Creditors, Par
Liabilities to Partners, etc.)

Number 4
Which of the following might not be required of a supervising accountant during a partnership
installment liquidation?
a. Pay liabilities as quickly as possible
b. Determine the amount of distribution that can be made to partners during the liquidation
c. Protect the creditors' interest
d. Estimate cash flows over the remaining life of the partnership
Ans: B
Related Discussion: Cash payment distribution concept as soon as cash is available.

Number 5
Which of the following is not part of the calculation to determine the loss absorption power
when preparing a cash distribution plan?
a. Loans to partners by the partnership or loans to the partnership by partners
b. Partner capital account balances
c. Partner profit and loss residual ratios
d. All of the above are considered when calculating the loss absorption power
Ans: D
Related Discussion: Cash Priority Program (CPP)

Number 6
When is it possible to use a schedule of safe payments during a partnership liquidation?
a. When partners share profits differently than they share losses
b. When one or more partners enter the liquidation with a deficit capital account balance
c. When either a or b occur
d. A schedule of safe payments is not used for a partnership liquidation
Ans: D
Related Discussion: Conditions when to use Safe Payment or CPP


Number 7
Lari, Eugene, Napilot and Ledif partners to a law firm share profits 5:3:1:1 respectively. Partners
accounts prior to liquidation were as follows:
Advances (Dr) Loans (Cr) Capitals (Cr)
Lari - 5,000 40,000
Eugene - 10,000 30,000
Napilot 4,500 - 15,000
Ledif 2,500 - 25,000
At this point, cash of P18,000 is available for distribution to the partners. How much of the
P18,000 cash should be distributed to each partner?
Lari Eugene Napilot Ledif
a 0 18,000 0 0
b 0 0 0 18,000
c 0 6,625 0 11,375
d 9,000 5,400 1,800 1,600

Answer C
Related Discussion: Diff of Advances to/from, Loan to/from

Number 8
Emman, Yanna, and CJ, partners of the MOMO Partnership, shared profits and losses in the ratio
of 5:3:2, respectively. On December 31, 2016, the end of an unprofitable year, they decided to
liquidate the partnership. The partners' capital account balances on the date were as follows:
Emman, capital P22,000
Yanna, capital 24,900
CJ, capital 15,000
The liabilities of the partnership amounted to P30,000 including a loan of P10,000 payable to
Emman, the party-goer. The cash balance was P6,000. The partners planned to realize the non-
cash cash assets in installment and to distribute cash as it becomes available. All three partners
are solvent.
If Emman, the party-goer, received a total of P20,000 as a result of liquidation, what was the
total amount realized by the partnership on the non-cash assets?
a. P85,900
b. P91,900
c. P67,900
d. P61,900
Answer D
Related Discussion:

Number 9 and 10
Based on the following data on December 31, 2016, the accounting records of the Arante, De
Guzman, Vasquez (ADV) Partnership included the following ledger account balances:
(Dr) Cr
A, drawing P(24,000) A, capital 123,000
D, drawing ( 9,000) D, capital 100,500
V, loan 30,000 V, capital 108,000
Total assets of the partnership amounted to P478,500, including P52,500 cash. The partnership
was liquidated on December 31, 2016 and Vasquez received P83,250 cash pursuant to the
liquidation. A, D, and V shared income and losses in a 5:3:2 ratio, respectively.
How much is the loss on realization of assets?
a. P178,750
b. P 78,750
c. P 23,750
d. P123,750
How much cash is received by Arante?
a. P35,625
b. P59,625
c. P37,125
d. P13,125

Answer B; B
Related Discussion: Application of CPP to partner’s capital with debit balance

Number 11
Partners Klynveld, Peet, Marwick and Goerdeler of KPMG LLP, who share profits 5:3:1:1,
respectively, decide to liquidate their partnership. Capital balances before liquidation are:
Klynveld, capital P60,000
Peet, capital 40,000
Marwick, capital 30,000
Goerdeler, capital 10,000
The partners agree to the following:
(1) Partnership's computer equipment with a book value of P 12,000 is to be taken over by
partner Klynveld at a price of P 15,000.
(2) Partnership's liabilities are to be paid off and the balance of cash on hand, P30,000 is to be
divided in a manner that will avoid the need for any possible recovery of cash from a partner.
How much of the P30,000 cash be distributed to Partner Peet?
a. P10,000
b. P -0-
c. P20,000
d. P15,000

Answer A
Related Discussion: Theoretical Loss